Innovation Ecosystems in France and in the USA

INNOVATION ECOSYSTEMS IN FRANCE AND IN THE USA
By Dr. Didier Kane, FABCA Board Member

Both France and the USA have a well-deserved reputation of being very innovative countries. In both countries, the educational system does contribute to the quality of the innovative ideas produced, but there are definite differences in the way it is financed and in the ability to turn these ideas into commercially successful products or services.

1) Sources of entrepreneurial ideas

a) In France, since Napoleon, the most prestigious higher education establishments are called “Grandes Ecoles”. These establishments, outside of the framework of the public university system, prepare administrative, scientific and business executives (called “cadres”) to become leaders in government or in private enterprise. By contrast with the United States, entrepreneurship education started late, with a handful of leading business schools having an entrepreneurship curriculum by the late 80’s. By the end of the century, there were over 1500 programs, but the internet bubble crash of the early 2000’s put a halt to this trend. A renaissance occurred nonetheless when President Jacques Chirac launched his objective of creating 1 million new companies in 5 years. In the last 10 years, government policies have encouraged innovation and entrepreneurship education by funding programs and infrastructure. This has led to world class entrepreneurship programs at schools such as EM Lyon and ESCP Europe. Not so long ago, the percentage of French students who contemplated an entrepreneurs life would be a one figure metric; now it is close to 30%.

b) In the US, as early as in the 1950’s there has been a focus on small businesses, with the creation of the National Council for Small Business Management Development and of the Small Business Administration Research Initiative. The first endowed entrepreneurship position was at Georgia State University in 1963. By the end of the 80’s, there were already close to a hundred endowed positions, entrepreneurship competitions at a number of universities and several conferences focused on that topic. While this trend has continued, it is important to point out the importance of the close collaboration between industry and universities and the corresponding programs funding which far outweighs what is done in France. That being said, the French Public Investment bank Bpi France makes billions in loans and grants available to fund start-ups and accelerators at easy terms. President Macron recently announced another €10 billion euro public fund to invest in start-ups. France is quickly catching up, but for the most part, the money comes from the Government instead of coming from the private sector.

2) The innovation infrastructure: Technology Transfer
Technology Transfer is the process of transferring the research results from educational and research institutions to the private sector, in order to enable the development of products, services or technologies from the knowledge at these institutions.
a) In France
Being part of Europe, France benefits from the EU’s innovation initiatives. PROGRESS-TT (“Public Research Organization GRowing Europe through best practice SolutionS for Technology Transfer”), launched on January 20, 2015, is the European Commission initiative to improve the capacity of public research organizations to convert investment in research into commercial returns through innovation. This is part of the broader Horizon 2020 program, the biggest EU Research and Innovation program ever with nearly €80 billion of funding available over 7 years (2014 to 2020). A strategic agenda “France Europe 2020” was issued by the Minister for Higher Education and Research on May 21, 2013. Starting in 2012, 1 billion Euros were invested through a national loan called “investissements d’avenir” (investments for the future). Among other priorities, it gave rise to 14 SATTs (Sociétés d’Accélération de Transfer de Technologie). This was part of a regional strategy in which universities in a given region have been regrouped under a single umbrella. As at July 1, 2017, the SATT had 596 Professionals specializing in intellectual property, technology project engineering, law, marketing and business development; 8 777 innovative projects identified and analyzed; 1,906 priority patents filed
573 operating licenses signed with companies of which 202 start-ups created. According to the European Patent Office, around 11,000 patents are filed each year in France, whereas the US files 4 times that number in Europe. To put things in perspective, a 2014 report published by the World Intellectual Property Organization revealed that approximately 2.1 million patents were being filed each year, a number that has continued to grow exponentially in the last three years.

b) In the US, Technology Transfer dates back to the 1920’s, with the establishment of the Wisconsin Alumni Research Foundation. The 30’s gave birth to the Iowa State Patents Foundation, and the 40’s to the MIT Licensing Office; the 50’s to the University of Minnesota Foundation and the late 60’s to the Stanford University Office of Technology Licensing. But it is the Bayh/Dole Act of 1980 that considerably accelerated the number of TTOs (Technology Transfer Offices), from 35 then to over 160 by year 2000. In recent years, Stanford has been generating around $100 Million per year in direct technology licensing and another $20 million in equity liquidations. Its “BASES” network is the largest student-run entrepreneurship organization in the country, with other 5,000 current and alumni students. In Texas, Texas A&M ‘s Office of Technology Commercialization (OTC) has generated over $60 M in the ;last 5 years and over $170 million in the last 10 years. As for the University of Texas, its OTC generated close to $23 million in 2015 and close to $160 million in the last 10 years. According to the 2015 AUTM licensing survey, over the past 25 years, US research faculty, students and staff have reported more than 380,000 innovations to their technology transfer offices, filed more than 206,000 new patent applications, and were issued more than 84,000 US patents. These innovations were licensed to thousands of companies, including nearly 11,000 startups. Research institutions shared in the success of their startups, earning more than $1 billion in equity, much of which was reinvested for future research.

c) The Office for Science and Technology of the Embassy of France in the United States – has launched in 2008 an exchange program dedicated to managers of technology transfer entitled: «Technology Transfer Fellowship Exchange Program». This program is aimed at senior managers from universities, research labs who want to improve their competencies and to share their experience in terms of technology transfer. Beneficiaries of the program are welcomed into a structure which provides them access to an office in the Technology Transfer department for several weeks (up to 3 months) in order to exchange good practices and to work on concrete examples.

3) The innovation infrastructure – Incubators and accelerators

a) The first incubators (called “pépinières d’entreprises”) were established by a French Government Agency (“Agence pour la création d’entreprises”) in the early 90’s. Their number has kept growing since. In the last 10 years, large French Corporations seeing their growth being somewhat anemic, decided to launch their own (e.g. Orange Valley). Their number keeps growing (there were over 50 in Paris alone in 2016).
In order for these companies to progress to the next stage of growth, a first French accelerator, Numa’s “Le Camping” was launched in 2011. While new laws on “auto-entrepreneurship” were established in 2009 to make it easier for people to create their own company, entrepreneurs had to rely on their personal network and on their investors to find mentors to help them beyond the incubation stage.
Fast-forwarding to today, France has done remarkable progress to catch up with other leading innovation ecosystems around the world.
Today, Xavier Niel, who started Iliad, France’s fourth-largest mobile operator, lunches a vast, vaulted 360,000-sq.-ft space, in a former train depot renamed Station F, will be the largest incubator in the world, housing 1,000 start-ups and 3,000 work spaces for entrepreneurs, consultants and investors. According to Paris Genome 2017, Paris has between 2,000 and 2,600 Tech startups and an ecosystem valued at US $12 Billion. In 2014, the government started French Tech to facilitate and showcase the country’s tech credentials. Initially, thirteen French cities were designated high-tech hub and the number has grown since. The French Tech ecpcystems sometimes assemble several cities around a ingle theme, e.g. : Normandy French Tech (Caen, Le Havre, Rouen); LORnTECH (Nancy, Metz, Epinal, Thionville), Lille’s French Tech (Lille, Roubaix, Tourcoing, Calais, Va-lencienne), Dunkerque, Lens), French Tech in the Alps (Grenoble, Annecy, Chambéry, Romans- Valence), etc. Austin’s sister city in France, Angers, acquired the label for its IoT expertise (even though Toulouse, with its IoT valley, is very active in this area). The French government also supports the growth of French start-ups in dozens of foreign cities, including Abidjan, Barcelona, Hong-Kong, Israël, Le Cap, London, Montréal, Moscow, New-York, San Francisco, Seoul and Tokyo, to which were added Berlin, Dubaï, Los Angeles, Milan, Beijing, Sao Paulo, Shanghaï, Shenzhen, Taiwan and Vietnam. The vibrant French Ecosystem in Austin is very likely to be next on the list. La French Tech promotes French entrepreneurs at big industry events like the Consumer Electronics Show in Las Vegas. (where this year the French Tech contingent won a staggering 50 innovations awards in total, and 3 Best of Innovations awards). For the sixth year in a row, France dominated the rankings of Deloitte’s 2016 Technology Fast 500 EMEA, which identifies the fastest-growing technology companies in Europe, the Middle East and Africa. The country has several unicorn startups too, like BlaBlaCar, Sigfox and Devialet.

b) According to According to the 2017 Global Entrepreneurship Index, published by the GEDI, France has a robust entrepreneurial environment. But it was placed 13th out of 137 in the 2017 rankings, and took 10th place in Europe. By contrast, The United States held onto the top spot this year, followed by Switzerland and Canada. The latest Kauffman index of startup activity shows that Rate of New Entrepreneurs, calculated as the percentage of adults becoming entrepreneurs in a given month, has increased by more than 15 percent in the last two years. Entrepreneurial activity seems to be increasingly happening beyond the stereotypical entrepreneurial hubs of places like Silicon Valley and Boston. Among the other cities that had the most IPOs are San Diego, Nashville, Dallas and Washington DC, Denver, Cincinnati and Charlotte. The metros with the highest levels of activity relative to their size in the most recent Kauffman report are Washington, D.C.; Austin, TX; and San Jose, CA.
As of January 2015, there were roughly 300 true accelerator programs in the US and over 1,000 incubation/tech transfer programs. Every year from 2008 to 2014, the number of accelerators in the U.S. jumped by an average of 50 percent, according to a Brookings Institution research report. According to Startup Ranking, there are close to 38,000 startups in the US, India is a distant second with less than 4,000 and France ranks 15th with less than 500. While this may be a reasonably accurate overall picture, in some sectors, France fares much better. For instance, in the January 2017 Nature Biotechnology Survey, France ranked 3rd, ahead of China and Canada (but behind the UK and far behind the US) for the number of startups in that sector.

CONCLUSION:

The US remains, by far, the world leader in entrepreneurial education and for the creation, launch, funding and growth of startups. France has invested heavily in the last 5 years in this sector of the economy, and its strong and evolving education system has also developed a culture of innovation, present in French companies of all sizes. However, the elite “Grandes Ecoles” are still geared towards guaranteeing leadership roles in the CAC40 companies. Both countries have introduced laws that favor innovation and entrepreneurship. But the biggest differences between France and the US are the amount of venture capital funding that is significantly higher in the US, and the respective roles of the Government and of Industry: the former leads in France and the later plays a very limited role whereas the opposite can be seen in the US.